Proposed Placing and Open Offer

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA OR THE UNITED STATES OR INTO ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OR BREACH OF ANY APPLICABLE LAW. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES AND NEITHER THIS ANNOUNCEMENT NOR ANYTHING HEREIN FORMS THE BASIS FOR ANY CONTRACT OR COMMITMENT WHATSOEVER. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION AND THE SECURITIES DESCRIBED HEREIN WILL BE SOLD IN ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS.

THE DEFINED TERMS SET OUT IN THE APPENDIX APPLY IN THIS ANNOUNCEMENT.

13 April 2015

Sphere Medical Holding plc

("Sphere", "Sphere Medical", or the "Company")

Proposed Placing and Open Offer

Cambridge, UK, 13 April 2015: Sphere Medical Holding plc (AIM: SPHR.L), a leading provider of innovative monitoring and diagnostic devices for the critical care setting, today announces that it is planning to raise, subject to certain conditions, approximately £12 million (before expenses), by way a Placing pursuant to which 75,000,000 New Ordinary Shares will be issued at 16 pence each to new and existing investors.

Woodford Investment Management, on behalf of its clients, has given a non-binding intent to invest up to £4 million in the Placing and the Wales Fund (being a fund raising up to £100 million focused on life sciences and managed by Arthurian), has given a conditional commitment to invest £4 million in the Placing. The Placing Shares have been conditionally placed by the Joint Brokers with new and existing institutional investors other than those which may be subscribed for by Woodford Investment Management, on behalf of its clients.

In addition, the Company is seeking to raise up to £1.2 million by way of an Open Offer of 7,425,661 Open Offer Shares to Qualifying Shareholders, together the "Fundraising". The Issue Price represents a discount of 18 per cent. to the 19.5 pence closing middle market price of an Ordinary Share on 10 April 2015, being the last trading day prior to the publication of this announcement.

As a condition of the £4 million commitment under the Placing from the Wales Fund, the Company has agreed to, inter alia, implement a phased approach to moving its manufacturing operations to Wales commensurate with the planned scale-up of those operations and to establish a corporate office in Wales. Furthermore, conditional upon Admission and in accordance with Wales Fund Agreement, Brenig Preest shall be appointed as a Non-Executive Director of the Company.

The Placing is conditional upon fulfilment of certain conditions including, inter alia:

• the passing of the Resolutions at the General Meeting;

• the Placing Agreement entered into between the Company, Peel Hunt and finnCap becoming unconditional in all relevant respects and not having been terminated in accordance with its terms prior to Admission;

• minimum gross proceeds of £9.0 million, in aggregate, being raised by the Company pursuant to the Fundraising;

• Woodford Investment Management, on behalf of its clients, subscribing in the Placing; and

• Admission becoming effective by no later than 8.00 a.m. on 1 May 2015 or such other date (being not later than 8.00 a.m. on 15 May 2015) as the Joint Brokers and Sphere Medical may agree.

The Company will shortly be publishing and sending to Shareholders a circular (the "Circular") in connection with the Fundraising and will convene a General Meeting on 30 April 2015 to approve certain matters necessary to implement the proposed Fundraising. The Circular will also be made available on the Company's website www.spheremedical.com. The Placing and Open Offer are also conditional upon Admission, which is expected to take place on 1 May 2015.

Summary

· Proxima 3 was launched in the UK in September 2014 and since then the product has generated increasing interest within the intensive care community. A small direct sales team has been hired and there has been a strong growth in the sales pipeline. More than 20 prospects have been identified for product evaluations and sales proposals, from which 10 individual hospital approval processes are currently being undertaken. Furthermore, the first intention to purchase has been received from Queen Elizabeth Hospital Birmingham.

· In March 2015, Proxima 3 was launched into Europe at the International Symposium on Intensive Care and Emergency Medicine (ISICEM) in Brussels. The initial target markets will be the Netherlands, Belgium and Germany. The Company's first direct sales manager has been hired for Germany and the Benelux sales manager hiring process is in progress.

· Development of Proxima 4 is being undertaken pursuant to the Collaboration Agreement with Ortho-Clinical Diagnostics. The development of Proxima 4 is scheduled to complete in July 2015 and its commercial launch in the UK and Europe is expected to take place in H1 2016.

· It is a key strategic objective for the Company to secure a commercial partner to maximise the commercial potential for Proxima. In January 2015, the Company appointed Mr Meinhard Schmidt and Dr David Martyr to the Board as Non-Executive Directors. These appointments have bolstered the Board with two highly experienced professionals with significant experience in commercialising medical devices as well as strong track records in business development and mergers & acquisitions.

Commenting on today's announcement, Dr. Wolfgang Rencken, Chief Executive Officer of Sphere Medical, said:

"Since I joined as Chief Executive Officer in February 2014 the Company has undergone a rapid and profound transformation into a commercial medical device company. We have focussed our efforts on launching Proxima 3 into the market and in building a commercial team to drive commercial sales. In March of this year we launched Proxima 3 into Europe where we intend to initially focus our sales efforts on the German, Netherlands and Belgium markets. Proxima continues to be endorsed as a medical device that addresses the unmet market need for frequent blood gas measurements for clinically unstable patients. At the same time we have continued with the development of Proxima 4.

I am pleased with the progress we are making and believe that we are well on the way towards becoming a commercially successful company. Furthermore, today's announcement of the proposed Placing and Open Offer will provide the Company with the financial resources to deliver near-term operational and commercial value drivers which I am confident will create substantial value for our shareholders."

For further information, please contact:

Notes for Editors

Sphere Medical is a medical device company developing and commercialising a range of innovative monitoring and diagnostic devices designed to significantly improve patient care.

Sphere Medical's vision is to become a leading solution provider to the critical care market offering innovative, near real time, point of care diagnostic and monitoring products to enable closer control of therapeutic response and improve patient outcomes and reduce the overall cost of care.

The Company's strategy is focused on developing the Proxima (CE marked device) platform for measuring blood gases, electrolytes and metabolites. The Company is already marketing its Proxima product directly to the critical care market, which includes the ICU and OR, with a dedicated field sales force in the UK. Sphere has plans to follow in Germany and Benelux via a direct sales force in Europe and proposes to work with partners for worldwide distribution.

Proxima delivers near real time analysis of blood gases and electrolytes metabolites, at the patient's bedside. Proxima can be used on patients across a wide therapeutic range, enabling faster clinical decision making and improved patient outcomes, whilst potentially reducing costs for healthcare payers.

Sphere Medical entered into a collaboration agreement with Ortho-Clinical Diagnostics, Inc. in 2013 for the development of Proxima and enhancement of Sphere's operational and production capabilities.

Sphere Medical has a number of partnerships with industry leading medical device companies and has received a strategic investment from Ortho-Clinical Diagnostics (now part of Carlyle Group).

For further information, please visit www.spheremedical.com

Note regarding forward-looking statements:

This announcement contains certain forward looking statements relating to the Company's future prospects, developments and business strategies.

Forward looking statements are identified by their use of terms and phrases such as "targets" "estimates", "envisages", "believes", "expects", "aims", "intends", "plans", "will", "may", "anticipates", "would", "could" or similar expressions or the negative of those, variations or comparable expressions, including references to assumptions.

The forward looking statements in this announcement are based on current expectations and are subject to risks and uncertainties which could cause actual results to differ materially from those expressed or implied by those statements.

These forward looking statements relate only to the position as at the date of this announcement. Neither the Directors nor the Company undertake any obligation to update forward looking statements or risk factors, other than as required by the AIM Rules for Companies or by the rules of any other applicable securities regulatory authority, whether as a result of the information, future events or otherwise.

You are advised to read this announcement and, once available the Circular and the information incorporated by reference therein, in their entirety for a further discussion of the factors that could affect the Company's or the Group's future performance and the industries in which they operate. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

Neither the content of the Company's website (or any other website) nor any website accessible by hyperlinks on the Company's website (or any other website) is incorporated in, or forms part of, this announcement.

Any person receiving this announcement is advised to exercise caution in relation to the Fundraising. If in any doubt about any of the contents of this announcement, independent professional advice should be obtained.

This summary should be read in conjunction with the full text of the announcement which follows.

Background to and reasons for the Fundraising

Sphere Medical was admitted to AIM in November 2011 and since then has significantly advanced the development of Proxima, its disposable patient-attached arterial blood gas analyser. In June 2014, the Company announced the receipt of CE Marking for Proxima 3,

The net proceeds of the Fundraising are intended to be used for marketing and selling Proxima 3 in the UK, the Netherlands, Belgium and Germany, completing the development of Proxima 4, obtaining the CE Marking and launching Proxima 4 for sale in Europe, increasing production capacity and improving operations. The net proceeds of the Fundraising will also strengthen the Company's balance sheet ahead of discussions with potential partners for Proxima.

Proxima is Sphere Medical's patient-attached arterial blood gas analyser for use in the hospital intensive care units, operating theatres and other acute care settings. Proxima is a disposable multi-parameter microanalyser that is integrated into a patient's existing arterial line. When a blood gas reading is required, arterial blood is drawn across the microanalyser and measured. The blood gases and electrolyte results are then displayed on a dedicated Sphere Medical made monitor at the bedside. With Proxima, all blood is returned into the patient after the reading is taken. It is approved to measure frequently for up to 72 hours.

Currently blood gases are typically measured every 3-4 hours on patients. For critically ill patients this might be increased to up to 19 measurements per day. Blood is extracted from the patient by the nurse with a syringe and sent to the laboratory for measurement or the nurse takes the syringe to a nearby desktop blood gas analyser. Sometimes a handheld point-of-care analyser is also used. The blood is inserted into the analyser, the measurements are made and the results noted.

Patients would benefit from more frequent measurements, when for example the onset of critical conditions could be detected earlier and complications prevented. Furthermore, when the patient condition improves, they could be weaned off the ventilator at an earlier stage. However the main barrier to more frequent measurements lies in the increased workload of nursing staff, the rise in blood anaemia for the patients and the rise in infection risk for both the patient and the nursing staff.

The Directors believe that Proxima offers a number of benefits over current blood gas analysers. These include:

• keeps the nurse at the patient's bedside;

• conserves the patient's blood;

• reduces the infection risk; and

• makes it easier to make more frequent measurements.

In September 2014, Proxima 3 was launched at the AAGBI Annual Congress which in turn has enabled the UK sales team to build a strong and growing sale pipeline, including receiving the first committed intention to purchase from Queen Elizabeth Hospital Birmingham. 

Within the UK and in Europe, Proxima 3 is being marketed to clinical segments where patient management requires frequent measurements. These areas include:

• Severe sepsis and septic shock

• Acute respiratory distress syndrome

• Major trauma

• Neuro trauma

Proxima enables closer control of therapeutic response and is expected to improve patient outcomes. For example, during the post market clinical follow up study a patient, whose condition had been stable for over 30 hours, suddenly deteriorated. Since the study protocol required very frequent measurements, this deterioration could be detected far earlier than would normally be the case in routine practice.

In September 2014, Proxima 3 was launched at the AAGBI Annual Congress which in turn has enabled the Company's UK sales team to build a strong and growing sales pipeline, including receiving the first committed intention to purchase Proxima from Queen Elizabeth Hospital Birmingham. Within the UK and in Europe, Proxima 3 is being marketed to clinical segments where patient management requires frequent measurements. These areas include: severe sepsis and septic shock, acute respiratory distress syndrome, major trauma and neuro trauma.

Within the UK, the Company has thus far identified over 90 initial clinical leads of which more than 20 have been identified for product evaluations and sales proposals, from which 10 individual hospital approval processes are currently being undertaken. The Company expects to announce its first UK sale of Proxima in the first half of 2015.

In March 2015, the Company launched Proxima 3 into Europe at the 35th International Symposium on Intensive Care and Emergency Medicine (ISICEM), Brussels. The Company's strategy is to initially target sales in the Netherlands, Belgium and Germany and, to this end, has hired its first sales manager for the German market. The process of hiring a sales manager for Benelux is in progress. 

To facilitate the launch of Proxima 3 into the target markets, two leading European clinicians have been appointed to the Company's Medical Advisory Board. Professor Jean-Louis Vincent, Professor of Intensive Care at the Université Libre de Bruxelles and the Head of the Department of Intensive Care, Erasme University Hospital (University of Brussels) and Professor Quintel is the Director of the Department of Anaesthesiology, Emergency and Intensive Care Medicine at the University of Göttingen, Germany. The Company anticipates that it will announce its first European sale of Proxima in the second half of 2015.

In June 2013, the Company announced it had entered into a Collaboration Agreement with OCD for the development of Proxima 4 and the enhancement of the Company's operational and production capabilities. The Collaboration Agreement also provides a framework for OCD and Sphere Medical to negotiate a proposed global commercialisation deal for Proxima 4.

Proxima 4 is Sphere Medical's next generation disposable patient-attached arterial blood analyser. In addition to Proxima 3's analyte sensor panel of pH, pCO2, pO2, Haematocrit and K+, Proxima 4's panel will be expanded to include glucose and Na+. Furthermore, Proxima 4 will also facilitate the integration with the hospital and laboratory information systems and patient data services.

It is the Directors' belief that the launch of Proxima 4, with its expanded analyte sensor panel and IT connectivity, will substantially increase the market size and potential demand for Proxima. The development work on Proxima 4 is progressing to the Company's project plan and the Directors anticipate that Proxima 4 will be available for commercial launch in the first half of 2016.

The overall market worldwide for blood gas and electrolyte testing in 2013, which includes instruments, servicing and consumables, was projected at US$3.2 billion and growing at a combined annual growth rate ("CAGR") of 3.1 per cent. Within this overall market, the point-of-care worldwide market is US$0.9 billion and growing at a CAGR of 4.9 per cent. The European proportion of this worldwide point-of-care is US$0.3 billion and growing at a CAGR of 4.8 per cent. The global market potential of Proxima when sold worldwide is in excess of US$200 million per annum.

It is a key strategic objective for the Company to secure a commercial partner to maximise the commercial potential for Proxima. In January 2015, the Company appointed Mr. Meinhard Schmidt and Dr. David Martyr to the Board as Non-Executive Directors. These appointments have bolstered the Board with two highly experienced professionals with significant experience in commercialising medical devices as well as strong track records in business development and mergers & acquisitions. The Company expects to begin negotiations for a proposed commercial deal in the second half of 2015.

Details of the Placing

The Company proposes to raise gross proceeds up to approximately £12 million (approximately £11.2 million net of estimated expenses) from new and existing institutional investors, pursuant to the Placing. Woodford Investment Management, on behalf of its clients, has given a non-binding intent to invest up to £4 million in the Placing and the Wales Fund has given a conditional commitment to invest £4 million in the Placing. The Placing Shares have been conditionally placed by the Joint Brokers with new and existing institutional investors other than those which may be subscribed for by Woodford Investment Management, on behalf of its clients. The Placing is not being underwritten and, therefore, there is no certainty that any funds will be raised under the Placing.

The Placing Shares represent approximately 126 per cent. of the Existing Ordinary Shares.

The Issue Price represents a discount of 18 per cent. to the 19.5 pence closing middle market price of an Ordinary Share on 10 April 2015, being the last trading day prior to the publication of this announcement. The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares. Application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will take place, and dealings in the New Ordinary Shares will commence, on 1 May 2015.

The Placing is conditional, inter alia, on:

• the passing of the Resolutions at the General Meeting;

• the Placing Agreement entered into between the Company, Peel Hunt and finnCap becoming unconditional in all relevant respects and not having been terminated in accordance with its terms prior to Admission;

• minimum gross proceeds of £9 million, in aggregate, being raised for the Company pursuant to the Fundraising;

• Woodford Investment Management, on behalf of its clients, subscribing in the Placing; and

• Admission becoming effective by no later than 8.00 a.m. on 1 May 2015 or such other date (being not later than 8.00 a.m. on 15 May 2015) as the Joint Brokers and Sphere Medical may agree.

Details of the Open Offer

The Board considers it important to provide the Company's loyal and supportive Shareholders with an opportunity to participate in the Fundraising in recognition of their continued support to the Company.

Qualifying Shareholders can therefore subscribe for, in aggregate, up to £1.2 million (before expenses) in Open Offer Shares without the Company having to produce a prospectus (in accordance with the Prospectus Rules) which would have both cost and timing implications for the Company.

Qualifying Shareholders, on and subject to the terms and conditions of the Open Offer, will be given the opportunity under the Open Offer to apply for any number of Open Offer Shares at the Issue Price pro rata to their holdings on the following basis of 1 Open Offer Share for every 8 Existing Ordinary Shares.

The Open Offer Shares will rank pari passu in all respects with the Existing Ordinary Shares. Fractions of Open Offer Shares will not be allotted to Qualifying Shareholders in the Open Offer and entitlements under the Open Offer will be rounded down to the nearest whole number of Open Offer Shares. The Issue Price represents a discount of 18 per cent. to the 19.5pence closing middle market price of an Ordinary Share on 10 April 2015, being the last trading day prior to the publication of this announcement.

There will be up to 7,425,661 New Ordinary Shares available to Qualifying Shareholders under the Open Offer. A full take up of the Open Offer Shares would represent approximately 5.2 per cent. of the Existing Ordinary Shares.

Qualifying Shareholders (excluding Qualifying Placee Shareholders) are being offered the opportunity to apply for additional Open Offer Shares in excess of their Open Offer Entitlement to the extent that other Qualifying Shareholders (excluding Qualifying Placee Shareholders) do not take up their Open Offer Entitlements in full.

Qualifying Placee Shareholders are also being offered the opportunity to apply for additional Open Offer Shares in excess of their Open Offer Entitlement to the extent that other Qualifying Shareholders do not take up their Open Offer Entitlements in full.

The Open Offer is not underwritten and therefore there is no certainty that any funds will be raised under the Open Offer.

A Qualifying Shareholder may only apply for additional Open Offer Shares if they have themselves agreed to take up their Open Offer Entitlement in full.

The Company is also obliged, in accordance with the terms of the Share Option Agreements and the Darwin Warrant Instrument, to provide the Option Holders and the Darwin Warrant Holder with the opportunity to participate in the Open Offer (in kind) as if they were Qualifying Shareholders (excluding Qualifying Placee Shareholders). The Company will make a like offer as if the Option Holder had exercised the relevant options constituted by the relevant Share Option Agreement. The Company will also make a like offer as if the Darwin Warrant Holder had exercised the relevant warrants constituted by the Darwin Warrant Instrument. For further information on the like offer being made to Option Holders and the Darwin Warrant Holder please refer to paragraphs 5 and 9 of Part VI: "Additional Information" in the Circular. 

In the event that Qualifying Shareholders (and the Darwin Warrant Holder and Option Holders (in kind)) apply, in aggregate, for an amount that is greater than £1,188,106, the Directors will use their discretion to scale back such applications such that this threshold is not exceeded.

In the event that applications are received from Qualifying Shareholders (excluding Qualifying Placee Shareholders), Option Holders and the Darwin Warrant Holder for in excess of 7,425,661 Open Offer Shares, it is intended excess applications will be scaled back pro rata to such Qualifying Shareholders' (excluding Qualifying Placee Shareholders'), Option Holders' and the Darwin Warrant Holder's subscriptions under the Open Offer.

Applications for Open Offer Shares received from Qualifying Placee Shareholders will only be satisfied to the extent that all applications for Open Offer Shares received from Qualifying Shareholders (excluding Qualifying Placee Shareholders), Option Holders and the Darwin Warrant Holder have been satisfied in full. In circumstances where Qualifying Shareholders (excluding Qualifying Placee Shareholders), Option Holders and the Darwin Warrant Holder apply for, in aggregate, less than 7,425,661 Open Offer Shares (the "Shortfall") and applications are received from Qualifying Placee Shareholders for Open Offer Shares, in aggregate, in excess of the Shortfall (so that aggregate applications from Qualifying Shareholders (including Qualifying Placee Shareholders), Option Holders and the Darwin Warrant Holder exceeds 7,425,661 Open Offer Shares), applications received from Qualifying Placee Shareholders will be scaled back pro rata to Qualifying Placee Shareholders' subscriptions under the Open Offer.

The Open Offer Shares have not been placed under the Placing subject to clawback under the Open Offer nor have they been underwritten. Consequently, there may be no or fewer than 7,425,661 Open Offer Shares issued pursuant to the Open Offer.

The Directors believe that all of the Open Offer Shares should be eligible (subject to the circumstances of the investors and certain investment limits) for tax reliefs under EIS legislation. Any Open Offer Shares which are EIS Eligible Shares and which are not subscribed for shall be available to Qualifying Shareholders subscribing for Open Offer Shares generally. To the extent that Qualifying Shareholders apply for such number of Eligible Shares under the Open Offer which would mean the Company exceeds the £5 million investment limit in any 12 month rolling period, then the Qualifying Shareholders shall be issued Non Eligible Shares on a pro rata basis in replacement for such number of EIS Eligible Shares which exceed the Company's £5 million investment limit.

Application has been made for the Open Offer Entitlements and Excess CREST Open Offer Entitlements to be admitted to CREST. It is expected that the Open Offer Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST on 14 April 2015. The Open Offer Entitlements and Excess CREST Open Offer Entitlements will also be enabled for settlement in CREST on 14 April 2015. Applications through the CREST system may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim.

The latest time and date for acceptance and payment in full under the Open Offer will be 11.00 a.m. on 28 April 2015, unless otherwise announced by the Company via a Regulatory Information Service. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements and Excess CREST Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of entitlements under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim raised by Euroclear's Claims Processing Unit. Qualifying Non-CREST Shareholders should note that their Application Form is not a negotiable document and cannot be traded.

The Open Offer will be conditional, inter alia, on the approval of the Resolutions by the Shareholders at the General Meeting and upon the Placing Agreement becoming unconditional in all respects (other than as to Admission) and Admission of the Open Offer Shares becoming effective by not later than 8.00 a.m. on 1 May 2015 (or such later time and/or date as the Company and the Joint Brokers may determine, not being later than 8.00 a.m. on 15 May 2015).

If Admission does not take place on or before 8.00 a.m. on 1 May 2015 (or such later time and/or date as the Company, and the Joint Brokers may determine, not being later than 8.00 a.m. on 15 May 2015), the Open Offer will lapse, any Open Offer Entitlements and Excess CREST Open Offer Entitlements admitted to CREST will thereafter be disabled and application monies under the Open Offer will be refunded to the applicants, by cheque (at the applicant's risk) in the case of Qualifying Non-CREST Shareholders and by way of a CREST payment in the case of Qualifying CREST Shareholders, without interest as soon as practicable thereafter.

Settlement and dealings

Application will be made to the London Stock Exchange for the Open Offer Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on 1 May 2015.

Use of Proceeds

On the assumption that the Placing and Open Offer are both fully subscribed, the Company expects to deploy approximately £14.5 million (being the aggregate of the £12.3 million net proceeds of the Fundraising and the Company's existing cash and short term deposits of £2.2 million as at 31 March 2015) towards the ongoing business of the Company as follows:

Product Development (25%)

• Adapt Proxima 3 for Netherlands, Belgium and Germany

• Maintain Proxima 3 based on market feedback

• Complete Proxima 4 development

Sales and Marketing (25%)

• Support the sales and marketing of Proxima 3 in the UK and Europe

• Launch Proxima 4 in the UK and Europe

• Promote Proxima 3 and 4 at conferences and in clinical publications

• Conduct two further clinical studies

• Expand UK sales team

• Establish European sales team

Operations (30%)

• Implement a phased approach to moving manufacturing operations to Wales commensurate with the planned scale-up of those operations

• Establish permanent facility or site in Wales

• Increase production capacity (staff and equipment)

• Improve productivity and yields

• Improve supply chain

Regulatory (12%)

• Obtain CE Marking for Proxima 4

• Determine FDA approval options

The balance of funds will be used for general working capital purposes.

In the event that the minimum gross proceeds of £9 million are raised pursuant to the Fundraising, the Company still anticipates the use of proceeds to be broadly in line with the proportionate splits set out above.

Working Capital

As at 31 March 2015, the Company had cash and short term deposits of approximately £2.2 million. In the opinion of the Directors, having made due and careful enquiry, and taking into account the minimum gross proceeds of £9 million pursuant to the non-underwritten Placing receivable by the Company, the working capital available to the Group will from the time of Admission be sufficient for its present requirements, that is for at least twelve months from the date of Admission.

The Company also announced its audited preliminary results for the year ended 31 December 2014 on 13 April 2015. Please refer to the Company's announcement, as notified through the Regulatory Information Service and made available on the Company's investor relations website at: http://www.spheremedical.com/investor-relations/rns-notifications.

Importance of Vote

Shareholders should be aware that, if the Resolutions are not approved at the General Meeting, the net proceeds of the Fundraising will not be received by the Company. If this were to happen, the Company would only have sufficient working capital to trade through to the end of July 2015, without taking any mitigating action and therefore the Board would need to seek alternative financing which may or may not be forthcoming. The Directors consider that such a scenario would not be in the best interests of the Company or its Shareholders and that any alternative financing, if available, could be on less favourable terms and could risk leading to substantial dilution for Shareholders. Furthermore, given the importance of the Fundraising, even if certain Qualifying Shareholders decide not to participate in the Open Offer, the Board encourages those Shareholders to vote in favour of the Resolutions nonetheless. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolutions.

Board Changes

Pursuant to an assignment and assumption agreement dated 23 June 2014 entered into between JJDC and OCD (the "Assignment Agreement"), JJDC agreed to, inter alia, assign its rights under the subscription agreement dated 28 June 2013 entered into between JJDC and the Company (the "Subscription Agreement") and OCD agreed to assume all of JJDC's unsatisfied obligations and liabilities under the Subscription Agreement. Therefore, in accordance with the terms of the Assignment Agreement, it was agreed that for so long as OCD or its affiliates hold not less than 3 per cent. of the Ordinary Shares, OCD shall be entitled to designate (or otherwise approve) a non-executive director to the Board (the "OCD Director") (and, upon the resignation or removal of any person so appointed, OCD shall be entitled to designate (or otherwise approve) a replacement). The designation (or approval) of the OCD Director shall not be construed as conferring any power or authority on such person to represent or act on behalf of OCD. The appointment of an OCD Director shall be discussed between OCD and the Company and will be subject to approval by the Company's nominations committee and the Board. As soon as an OCD Director is appointed, a RIS announcement will be made.

In accordance with the Wales Fund Agreement and conditional upon Admission, it has been agreed, that for so long as the Wales Fund holds not less than 3 per cent. of the Ordinary Shares, the Wales Fund shall be entitled to appoint a non-executive director to the Board (the "Arthurian Director") (and, upon the resignation or removal of any person so appointed, Arthurian shall be entitled to designate (or otherwise approve) a replacement). The designation (or approval) of the Arthurian Director shall not be construed as conferring any power or authority on such person to represent or act on behalf of Arthurian.

It is proposed that Brenig Gwilym Preest (aged 42) will be appointed to act as the Arthurian Director with effect from Admission. Mr. Preest is an investment director at Arthurian, a venture capital firm, which provides management services to the Wales Fund (being a fund raising up to £100 million focused on life sciences). He is responsible for sourcing, investing and managing life science investment opportunities, many of which are listed on public stock exchanges, including ReNeuron PLC, Verona Pharma PLC and Medaphor PLC. Mr. Preest has spent over 15 years in the investment and corporate finance sector primarily investing in high growth medical technology and biotechnology opportunities and has been involved with over £500m of investments. His early career was at Amersham International (now GE Healthcare) and Coopers & Lybrand (now PwC). Mr. Preest is a chartered accountant, studied Pharmacology at Cardiff University, Financial Strategy at Oxford University and was previously elected regional president for the ICAEW.

Total Voting Rights

Following the issue of the New Ordinary Shares (assuming a full take up under the Open Offer), the total issued share capital of the Company will be 141,830,951 Ordinary Shares. The Company holds no Ordinary Shares in treasury. Accordingly, after Admission, the total number of voting rights in the Company will be 141,830,951 (assuming a full take up under the Open Offer and that all of the Placing Shares are issued).

Related party transaction and Directors' intentions

LSP Life Sciences Fund ("LSP") is a substantial shareholder in the Company as defined in the AIM Rules for Companies, in that it currently has an interest in more than 10 per cent. of the Company's current issued share capital. 

LSP has agreed to subscribe for 2,500,000 Placing Shares at the Issue Price as part of the Placing and, accordingly, the issue of Placing Shares to LSP constitutes a related party transaction in accordance with the AIM Rules for Companies. The Directors consider, having consulted with the Company's nominated adviser, Peel Hunt, that the terms on which the Placing Shares will be issued to LSP are fair and reasonable insofar as the Company's Shareholders are concerned.

Certain of the Directors are proposing to participate in the Fundraising. Meinhard Schmidt and David Martyr, who are not currently Shareholders in the Company, would need to participate in the Placing in order to participate in the Fundraising. Tony Martin, Wolfgang Rencken, John Gregory and Steve Mahle, who are Qualifying Shareholders, intend to subscribe for Open Offer Shares via the Open Offer or potentially via the Placing.

The Wales Fund Agreement

Pursuant to the Wales Fund Agreement, as a condition of the Wales Fund participating in the Placing, the Company has agreed to certain conditions, including that it will:

(i) implement a phased approach to moving its manufacturing operations to Wales commensurate with the planned scale-up of those operations;

(ii) change the registered address of the Company and its subsidiary undertakings to one in Wales;

(iii) establish a corporate office for the Company at the following address: Life Sciences Hub Wales, 3 Assembly Square, Cardiff CF10 4PL;

(iv) by no later than 31 October 2015, take a lease on a permanent facility or site in Wales, such facility or site to be operational in Q1 2016;

(v) from 31 July 2015 onwards, hold at least 75 per cent. of its planned board meetings in the ordinary course in Wales; and

(vi) use its best endeavours to relocate, or replace due to natural attrition, or establish by expansion any administrative, finance, sales, and other non-scientific functions in Wales.

In the event of non-performance of: (a) the conditions specified in (i)-(iv) inclusive above within twelve (12) months after Admission; and (b) the condition specified in (v) above within 12 months beginning on 31 July 2015, the Wales Fund shall be entitled to require the Company to purchase all or some of the Ordinary Shares legally and beneficially owned by the Wales Fund plus interest and to reimburse the Wales Fund for all reasonable and properly incurred third party costs associated with such purchase.

EIS and VCT Scheme

The Company has applied for and obtained provisional advance assurance from HMRC that the VCT Eligible Shares may constitute a qualifying holding for VCT Scheme purposes and the Company has also applied for and obtained provisional advance assurance from HMRC that the EIS Eligible Shares should satisfy the requirements for tax relief under EIS. However, none of the Non Eligible Shares will satisfy such requirements. Eligibility is also dependent on a Shareholder's own position and not just that of the Company. Accordingly, shareholders should take their own independent advice.

The General Meeting

The Fundraising is subject to the approval of the Shareholders at a General Meeting to be held at 5 the offices of Taylor Wessing LLP, New Street Square, London EC4A 3TW on 30 April 2015 at 10.00 a.m.

Shareholders should note that Resolutions 1 and 3 to be proposed at the General Meeting are inter-conditional and if any one of them is not passed the Placing and Open Offer will not proceed.

The Company is proposing that the Shareholders pass the Resolutions in order to:

• grant authority to the Directors under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum aggregate nominal amount of £829,724 being the maximum required for the purposes of issuing the New Ordinary Shares and satisfying the anti-dilution provisions in connection with the Warrants 2010; and

• empower the Directors, pursuant to section 570 of the Companies Act, to allot the New Ordinary Shares on a non pre-emptive basis (as set out in the Circular).

In addition, in order to give the Company a degree of flexibility to raise further cash at short notice that may be required to take advantage of strategic opportunities that create Shareholder value, the Company is proposing that the Shareholders pass Resolutions 2 and 4 in order to grant authority to the Directors:

• under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum nominal amount of £472,770 being one-third of the Enlarged Issued Share Capital;

• under section 551 of the Companies Act, to allot Ordinary Shares up to a maximum nominal amount of £945,540 (such amount to be reduced by any allotments or grants made under the paragraph above), being two-thirds of the Enlarged Issued Share Capital, pursuant to a rights issue in respect of which all Shareholders are entitled to participate as nearly as possible in proportion to their holding of Ordinary Shares at the time; and

• empower the Directors, pursuant to section 570 of the Companies Act, to allot Ordinary Shares up to the maximum nominal amount of £141,831 (being 10 per cent. of the Enlarged Issued Share Capital) on a non pre-emptive basis. This resolution also disapplies the statutory pre-emption provisions in connection with a rights issue or open offer and allows the Directors to make appropriate arrangements in relation to fractional entitlements or other legal or practical problems which might arise.

Action to be taken by Shareholders

Shareholders will find enclosed with the Circular a Form of Proxy for use at the General Meeting. The Form of Proxy should be completed and returned in accordance with the instructions printed thereon so as to arrive at the Company's Registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA as soon as possible and in any event not later than 10.00 a.m. on 28 April 2015. Completion and return of a Form of Proxy will not prevent Shareholders from attending and voting in person at the General Meeting should they so wish.

Admission, Settlement and CREST

Application will be made to the London Stock Exchange for each of the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will become effective on 1 May 2015 and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on that date.

The Articles permit the Company to issue shares in uncertificated form. CREST is a computerised paperless share transfer and settlement system which allows shares and other securities, including depository interests, to be held in electronic rather than paper form. The Ordinary Shares are already admitted to CREST and therefore the New Ordinary Shares will also be eligible for settlement in CREST.

CREST is a voluntary system and Shareholders who wish to retain certificates will be able to do so upon request. The New Ordinary Shares due to uncertificated holders will be delivered in CREST on 1 May 2015.

Definitive share certificates in respect of New Ordinary Shares are expected to be despatched by 1 May 2015.

Recommendation

The Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their own beneficial holdings of Existing Ordinary Shares amounting, in aggregate, to 355,842 Existing Ordinary Shares, representing, in aggregate, approximately 0.6 per cent. of the Existing Ordinary Shares.

Expected timetable of principal events

Record Date for entitlement upon the Open Offer 6.00 p.m. on 8 April 2015

Announcement of the Fundraising and publication of the Circular, 13 April 2015

Application Form and Form of Proxy

Ex-entitlement date of the Open Offer 8.00 a.m. on 14 April 2015

Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of 8.00 a.m. on 14 April 2015

Qualifying CREST Shareholders

Recommended latest time for requesting withdrawal of Open Offer Entitlements and 4.30 p.m. on 22 April 2015

Excess CREST Open Offer Entitlements from CREST

Latest time and date for depositing Open Offer Entitlements and Excess CREST Open Offer 3.00 p.m. on 23 April 2015

Entitlements into CREST

Latest time and date for splitting Application Forms (to satisfy bona fide market claims only) 3.00 p.m. on 24 April 2015

Latest time and date of receipt of completed Forms of Proxy to be valid at the General Meeting 10.00 a.m. on 28 April 2015

Latest time and date for receipt of completed Application Forms and payment in full under 11.00 a.m. on 28 April 2015

the Open Offer and settlement of relevant CREST instructions (as appropriate)

General Meeting 10.00 a.m. on 30 April 2015

Admission and commencement of dealings in New Ordinary Shares 8.00 a.m. on 1 May 2015

CREST accounts to be credited with New Ordinary Shares 8.00 a.m. on 1 May 2015

Dispatch of definitive share certificates for New Ordinary Shares in certificated form By 11 May 2015

Definitions

"£", "pounds", "pence" and "sterling" the legal currency for the time being of the United Kingdom

"Admission" admission of the New Ordinary Shares (comprising the Eligible Shares and the Non Eligible Shares) to trading on AIM and such admission becoming effective in accordance with the AIMRules for Companies

"AIM" AIM, the market of that name operated by the London Stock Exchange

"AIM Rules for Companies" the  rules  and  guidance  for  companies  whose  shares  are  admitted  to  trading  on  AIM published by the London Stock Exchange, as amended from time to time

 "Application Form" the personalised application form on which Qualifying Non-CREST Shareholders may apply for Open Offer Shares under the Open Offer

"Arthurian" Arthurian Life Sciences Limited (being the manager of the Wales Fund)

"Articles" the articles of association of the Company adopted by special resolution dated 3 November 2011as amended from time to time

"Board" the directors of the Company from time to time

 "CCSS" the CREST Courier and Sorting Service established by Euroclear to facilitate, inter alia, the deposit and withdrawal of securities

 "Collaboration Agreement" the collaboration agreement dated 28 June 2013 between theCompany, the Subsidiary and OCD in respect of the development of Proxima 4 and the enhancement of Sphere's operational and production capabilities and other matters

"Company" or "Sphere Medical" Sphere Medical Holding plc (company no. 4179503)

"Companies Act" the Companies Act 2006 (as amended)

"CREST" the computerised settlement system operated by Euroclear, which facilitates the transfer of title to securities in uncertificated form

"CREST Manual" the rules governing the operation of CREST consisting of the CREST Reference Manual, the CREST International Manual, the CREST Central Counterpart Service Manual, the CREST Rules, the CCSS Operations Manual, the Daily Timetable, the CREST Application Procedures and the CREST Glossary of Terms (as updated in November 2001)

 "CREST payment" shall have the meaning given in the CREST Manual

 "Darwin" Darwin Strategic Limited

"Darwin Warrants" the warrants issued to Darwin in connection with the EFF to subscribe for 250,000 Ordinary Shares (subject to adjustment) pursuant to the Darwin Warrant Instrument

"Darwin Warrant Holder" means the holder of the Darwin Warrants

"Darwin Warrant Instrument" the warrant instrument dated 12 July 2013 entered into by the Company in respect of the Darwin Warrants

"Directors" the directors of the Company

"EFF" the equity finance facility dated 27 June 2013 provided by Darwin to the Company

"EIS" Enterprise Investment Scheme under the provisions of Part 5 of the Income Tax Act 2007

"EIS Eligible Shares" those New Ordinary Shares which are expected to be eligible for taxation relief pursuant to EIS legislation

"Eligible Shares" the EIS Eligible Shares and VCT Eligible Shares

"EMI Options" enterprise  management  incentive  options  granted  under  the  EMI  Scheme  or  under separate standard EMI option agreements which satisfy the provisions under Schedule 5 Income Tax (Earnings and Pensions) Act 2003

"EMI Scheme" the Sphere Medical Holding Limited Share Option Scheme 2004

"Enlarged Issued Share Capital" the entire issued Ordinary Share capital of the Company immediately following Admission comprising of the Existing Ordinary Shares and the New Ordinary Shares (assuming full take up under the Open Offer)

"Euroclear" Euroclear UK & Ireland Limited at 33 Cannon Street, London EC4M 5SB

"Excess Application Facility" the arrangementpursuant to which Qualifying Shareholders may apply for any number of Open Offer Shares in excess of their Open Offer Entitlement provided they have agreed to take up their Open Offer Entitlement in full

"Excess CREST Open Offer Entitlements" in respect of each Qualifying CREST Shareholder, the entitlement (in addition to his Open Offer Entitlement)to apply for Open Offer Shares pursuant to the Excess Application Facility, which is conditional on him taking up his Open Offer Entitlement in full

"Existing Ordinary Shares" the 59,405,290 Ordinary Shares in issue at the date of the Circular

"FCA" the Financial Conduct Authority, acting in its capacity as competent authority in the United Kingdom pursuant to Part VI of FSMA

"finnCap" finnCap Limited, which is authorised and regulated by the FCA

"Form of Proxy" the form of proxy accompanying the Circular for use in connection with the General Meeting

"FSMA" the Financial Services and Markets Act 2000, as amended from time to time

"Fundraising" the Placing and Open Offer

"General Meeting" the general meeting of the Company convened for 10.00 a.m. on 30 April 2015, notice of which is set out at the end of the Circular

"HMRC" HM Revenue & Customs

 "Issue Price" 16 pence per New Ordinary Share

"JJDC" Johnson & Johnson Development Corporation, the previous owner of Ordinary Shares and the JJDC Warrants 2013 prior to the sale of Ordinary Shares and JJDC Warrants 2013 to OCD on or around June 2014

"JJDC Warrant Instruments 2013" the Series 1 JJDC Warrant Instrument 2013 and the Series 2 JJDC Warrant Instrument 2013

 "JJDC Warrants 2013" the Series 1 JJDC Warrants 2013 and the Series 2 JJDC Warrants 2013

"Joint Brokers" together Peel Hunt and finnCap (each a "Joint Broker")

 "London Stock Exchange" London Stock Exchange plc

 "New Ordinary Shares" the new ordinary shares of £0.01 each to be issued by the Company in accordance with thePlacing and the Open Offer and "New Ordinary Share" means one of them

"Non Eligible Shares" the New Ordinary Shares which are not Eligible Shares

"Notice of General Meeting" the notice of General Meeting which is set out on page 72 of the circular

 "OCD" Ortho-Clinical Diagnostics, an affiliate of The Carlyle Group, previously a part of Johnson & Johnson

 "Open Offer" the conditional offer made by the Company to Qualifying Shareholders inviting them to apply to subscribe for the Open Offer Shares on the terms and subject to the conditions set out in the circular and, in the case of Qualifying Non-CREST Shareholders, in the Application Form

"Open Offer Entitlements" an entitlement of a Qualifying Shareholder, pursuant to the Open Offer, to apply for 1 Open Offer Share for every 8 Existing Ordinary Shares held by the Qualifying Shareholder at the Record Date

"Open Offer Shares" up to 7,425,661New Ordinary Shares which are subject to the Open Offer

"Option Holders" the holders of options over Ordinary Shares pursuant to the Share Option Agreements, being Beer & Partners Limited, Mr Lawrence Fenelon and Mr Stephen McEwen

"Options" options over Ordinary Shares granted under the Share Option Schemes

"Ordinary Shares" ordinary shares of £0.01 each in the capital of the Company

 "Peel Hunt" Peel Hunt LLP, which is authorised and regulated by the FCA

"Placees" investors in the Placing

"Placee Warrants 2013" the Series 1 Placee Warrants 2013 and the Series 2 Placee Warrants 2013

"Placing" the  conditional  placing  of  the  Placing  Shares  pursuant  to  the  Placing Agreement

"Placing Agreement" the conditional placing agreement dated 13 April 2015 between the Company, Peel Hunt and finnCap relating to the Placing

"Placing Shares" the aggregate 75,000,000New Ordinary Shares which are subject to the Placing

  "Qualifying CREST Shareholders" Qualifying Shareholders whose Existing Ordinary Shares are held in uncertificated form

"Qualifying Non-CREST Shareholders" Qualifying Shareholders whose Existing Ordinary Shares are held in certificated form

"Qualifying Placee Shareholders" Qualifying Shareholders who are Placees under the Placing

"Qualifying Shareholders" Shareholders whose Ordinary Shares are on the register of members of the Company at 6.00 p.m.  on  the  Record  Date  with  the  exclusion  of  any  such  Shareholder  (subject  to exceptions) with a registered address or located or resident in the Restricted Jurisdictions

 "Record Date" 8 April 2015

"Registrars" Equiniti Limited

 "Regulatory Information Service" or "RIS" one of the regulatory information services authorised by the London Stock Exchange to receive process  and  disseminate  regulatory  information  in respect  of  AIM  quoted companies

"Resolutions" the ordinary and special resolutions to be passed by the Shareholders set out in the Notice ofGeneral Meeting

"Restricted Jurisdiction" each and any of Australia, Canada, Japan, the Republic of South Africa and the 

United States

 "Series 1 JJDC Warrants 2013" warrants to subscribe for 814,125 Ordinary Shares (subject to adjustment) pursuant to the Series 1 JJDC Warrant Instrument 2013

"Series 2 JJDC Warrants 2013" warrants to subscribe for 814,125 Ordinary Shares (subject to adjustment) pursuant to the Series 2 JJDC Warrant Instrument 2013

"Series 1 JJDC Warrant Instrument 2013" the warrant instrument dated 16July 2013 enteredinto by the Company in respect of the Series 1 JJDC Warrants 2013

"Series 2 JJDC Warrant Instrument 2013" the warrant instrument dated 16 July 2013 entered into by the Company in respect of the Series 2 JJDC Warrants 2013

"Series 1 Placee Warrants 2013" warrants to subscribe for 1,268,250Ordinary Shares (subject to adjustment) pursuant to the Series 1 Placee Warrant Instrument 2013

"Series 2 Placee Warrants 2013" warrants to subscribe for 1,268,250 Ordinary Shares (subject to adjustment) pursuant to the Series 2 Placee Warrant Instrument 2013

"Series 1 Placee Warrant Instrument 2013 the warrant instrument dated 16 July 2013 entered into by the Company in respect of the Series 1 Placee Warrants 2013

"Series 2 Placee Warrant Instrument 2013" the warrant instrument dated 16 July 2013 entered into by the Company in respect of the Series 2 Placee Warrants 2013

 "Shareholders" the holders of Existing Ordinary Shares

"Share Option Agreements" the share option agreements dated 10 November 2011 entered into by the Company separately with each of Beer & Partners Limited, Mr Lawrence Fenelon and Mr Stephen McEwen

"Share Option Schemes" the EMI Scheme, the EMI Options and the separate standard unapproved option agreements together

"Sphere" or "Sphere Group" the Company, togetherwith the Subsidiary

 "Subsidiary" Sphere Medical Limited (company number: 4179507)

"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland

"US" or "United States" the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia and any other area subject to its jurisdiction

 "VCT Eligible Shares" those New Ordinary Shares which are expected to be eligible for taxation relief under the VCT Scheme

"VCT Scheme" Venture Capital Trust scheme under the provisions of Part 6 of the Income Tax Act 2007

"Wales Fund" the Wales Life Sciences Investment Fund LP

 "Warrants" the Warrants 2010, Warrants 2013 and Darwin Warrants

"Wales Fund Agreement" the conditional agreement dated 13 April 2015 entered into between the Company and Arthurian (in its capacity as manager of the Wales Fund), pursuant to which certain ongoing commitments are being made by the Company to the Wales Fund conditional upon Admission

"Warrant Instruments 2010" the warrant instruments created by the Company in respect of the Warrants 2010 (as amended from to time)

"Warrants" the Warrants 2010, Warrants 2013 and Darwin Warrants

"Warrants 2010" warrants to subscribe for 1,020,977Ordinary Shares (subject to adjustment) pursuant to the relevant Warrant Instruments 2010

"Warrants 2013" the JJDC Warrants 2013 and the Placee Warrants 2013.